Monthly Archives

September 2009

Online advertising bigger than TV

By | Advertising, Google | One Comment

An Internet Advertising Bureau/PWC report out yesterday found that in the UK for H109 internet advertising passed TV advertising to become the biggest category.

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This is pretty big news, and more so when you think that people have yet to start watching TV over the web in volume.  When we hit that tipping point I predict a big acceleration of budgets online.  Total UK internet spend in H109 was £1.75bn

To breakdown the stats a little:

  • Internet spending grew 4.6% compared with the year ago period whilst the overall market shrank by 17%
  • The UK remains the world leader in terms of share of spend online
  • Within internet spending search remains totally dominant, with 60% of the total, an increasing share
  • Classifieds also grew
  • Display advertising shrank

My takeaways from this are:

  • The internet advertising secular growth story continues
  • The UK (London really) remains one of the best places to build an adtech business
  • I would think twice before relying too heavily on display as either a publisher or an adtech business
  • Google’s dominance of the largest part of this market is unhealthy, especially in the UK
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Google and Facebook show their scale advantage by copying Twitter

By | Facebook, Google, Search, Twitter | 4 Comments

I read this morning on search engine land that Google is going a bit more real-time by putting trending search topics information direct onto the first page of search results.  This works by adding a ‘Hot Trends Onebox’ near the bottom of the results page, see the picture below.

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For me this is a nice feature.  It will be cool to know when lots of other people are searching on the same topic as me, and also whether the topic has already peaked in popularity.

My point here though is that Google’s move shows the advantage their scale gives them versus startups like Twitter.  To explain; Twitter has done an awesome job building the realtime meme, and realtime search is an important part of that, and now Google is in a good position to take some of the benefits of all that hard work for themselves.  Hot Trends doesn’t compete directly with Twitter – it isn’t a microblogging service – but it does compete with Twitter Search, which is regarded as one of the potential money spinners for Twitter, and as such could hurt the world’s favourite micro-blogging platform as it tries to grow into its $1bn valuation.

To go into a little detail; Hot Trends looks at search query data, which Google is now describing as an alternative form of microblogging, with a MUCH higher volume of data. Google’s scale advantage comes from being able to quickly see what resonates with its huge user base and potentially innovate much faster than Twitter going forward (in this area).

A couple of caveats; 1) Twitter Search looks at the Twitter stream so the services are not directly comparable.  2) Google doesn’t have access to the full Twiiter firehose and so can’t compete directly with Twitter search.  The two companies are apparently in discussions though and the obvious value to Google of being able to index the full Twitter stream might be a clue as to why Twitter seems so relaxed about monetisation and why they attracted such a high valuation.

Facebook has been similarly copying Twitter although this time in direct competition with the core microblogging service.  They are also able to leverage their huge user base to quickly see what works and what doesn’t which gives them a structural advantage over Twitter going forward.

My point here is not that Facebook and Google will win, and Twitter won’t.  That battle remains open, and making the scale advantages count is not necessarily straight forward, plus all the services are a little different and there is probably space for all three (and I should also say that Twitter itself is pretty big now, in terms of users). 

The purpose of this post is rather to show how in the internet space everything plays out in public and larger companies can copy the best features from smaller competitors and then leverage the information that comes from their large user bases to innovate going faster going forward.  As a result the winner takes all dynamic is stronger on the web than in more traditional sectors of IT.

For a great breakdown of the realtime search world, looking at definitions and players check out this post from Danny Sullivan of search engine land.

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Public companies are not set up for innovation

By | Exits, Startup general interest, Venture Capital | 22 Comments

Last Friday my colleague Cedric Latessa sent me the following email:

General Electric is the only company remaining from the Dow Jones index of 1896. It has had fewer leaders since then (eight) than the Vatican has had popes.
Fortune

At first I was tempted to post it for the amusement value alone, but over the weekend I got to thinking that there was more to it that that.  This GE story is remarkable because the average tenure for a large public company CEO is somewhere around three years, and three years is too short a period to think about innovation.

The average venture backed company is probably 1-2 years old when it takes it’s first VC investment and that investor will be planning on holding the investment for 3-5 years before exiting.  It is only at the exit point that the company has demonstrated enough success to be significant for its acquirer meaning that from inception of the idea to being really significant the time period is 4-7 years.  If the average tenure of a large company CEO is 3 years then it is easy to see why investment in speculative innovation isn’t top of her priority list.

There are also a host of other reasons why innovation is happening more and more in small companies, of which the increasing pace of change is probably the most important and the stock market focus on quarterly results springs to mind given the central theme of this post.

Companies like Cisco, Microsoft, and IBM have been outsourcing R&D to the startup and venture communities for a long time and more recently Google, Yahoo, and AOL have picked up on the habit.  Going forward I expect we will see more of this, not less.

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Twitter Weekly Updates for 2009-09-27

By | Weekly Twitter digest | No Comments

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Lessons from the trials and tribulations of Yahoo

By | Community, Social networks, Web2.0 | 2 Comments

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Techcrunch wrote yesterday about Yahoo’s recent change of the Flickr logo and the other problems they have been having with  the site.  Collectively they show both the challenges of acquiring successful web communities in general and that Yahoo in particular still doesn’t understand how to manage a web2.0 property.

First the rebranding – all Yahoo did was add the ‘from Yahoo!’ that you can see in the picture to the existing Flickr logo.  Not too much to ask after owning the company for over four years you might think, but Flickr users reacted very badly, mostly because they don’t like Yahoo.  According to TC they complained on forums about Yahoo being stale and the logo being ugly.

These complaints illustrate the challenge in acquiring companies which are based on communities – unlike just about all other businesses the customers have a strong feeling of ownership which limits what you can do post acquisition – including your ability to wring out synergies, in this case at the branding level.  You may remember a similar furore when Yahoo tried to move Flickr users onto Yahoo IDs. 

Secondly, the Yahoo specific stuff.  One of the reasons that Flickr users don’t like Yahoo is that they don’t seem to understand what are probably best described as some of the key tenets of web2.0 – that you have to be open, transparent, balance your needs with that of your community and not be too high handed.  Yahoo got just about all these things wrong in a recent incident described on TC as follows:

Yahoo also got into a bit of a sticky situation with users when it removed a photoshopped image posted on Flickr of President Barack Obama that makes him look like the Heath Ledger (Joker) character from The Dark Knight. Flickr took the image down, citing a DMCA notice, adding that “We very much value freedom of speech and creativity.” Thomas Hawk had a good overview of all the gory details.

Strangely, the company not only took down the image, but also removed the Flickr page and comments, even though this isn’t required by the DMCA. And then, in what was a totally contradictory move, Yahoo shut down the forum discussions about the political controversy, cutting off further political discourse about the image.

These are examples of a general phenomena that we have talked about before – in community based businesses customers have a stronger than usual control over strategy.  UK football clubs are a good offline example of this.

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Information services migrating to mobile

By | Mobile, Startup general interest | 3 Comments

image The news today about TomTom’s iPhone package and the upcoming release of the Vodafone 360 social address book service left me reflecting on how quickly the mobile is becoming our central point of connectedness.  Beyond voice, it is now key to messaging, both SMS and email, and a host of other web services are fast gaining traction.  Now SatNavs are moving onto the phone and integrating social networking into the address book gives us something we have never had before and can’t readily get elsewhere.

On top of this there is of course the blizzard of iPhone apps and a browsing experience that is much improved over the last couple of years.

This amounts to a very powerful trend, and will be a fertile ground for startups.  That said, in mobile there is always the caveat that it is a trend everyone has seen coming for 10+ years now, and many of the incumbents who might be disrupted are better prepared to defend themselves than in other areas where change is happening this quickly.

(For those that are wondering, Vodafone 360 is based on technology from Zyb, a Danish company they acquired last year.)

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IBM adds microblogging to Lotus

By | Enterprise2.0 | No Comments

image IBM has added a bunch of enterprise 2.0 features to its Lotus Connections suite including status updates.  I think this could be a big deal.  Status updates could provide the communications glue that keeps everybody aligned and on strategy even as decision making and power are delegated to the edge of the organisation.

You could use Twitter for this, but it would be a hassle and it may be that few people buy IBM just for the status updates, but I wouldn’t be at all surprised to see microblogging become widely used across enterprises over the next few years.

Standards for use and new etiquette will need developing (e.g. to govern frequency of updates and appropriate mix of personal and work updates) and as with all new media there will be those who resist adoption, but the productivity and cultural benefits will make it all worthwhile.

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Survey shows 5% say they would pay for news online

By | Business models, Community, Content, News | 13 Comments

image A Harris research poll commissioned by paidContent:UK found that 5% of respondents think they would pay for news online, with the vast majority saying that instead they would simply go to an alternative free site.

If the 5% panned out in practice (and surveys are notoriously bad predictors of buying behaviour, so there is considerable downside risk to this figure) then a back of the envelope calculation shows that even with a fairly modest charge of £3-5 per month the subscription revenues gained are likely to significantly exceed the ad revenues lost from the 95% who decide to go elsewhere, so there is some good news in this figure.

The bad news, however, is that these revenues won’t add up to much of a total when compared with traditional hardcopy paper sales.

So we are looking at another story of the transition to digital shrinking an industry.

The only option I can see on the table for newspapers to mitigate this development is to build vibrant communities around their properties (as I have said before).  The catch, though, is that it is prohibitively hard to build a community whilst charging for content.

It is interesting to note that the newspaper that has had the most success building an online community (the Guardian, owner of paidContent) is also the one that is most opposed to charging.

Venture capital is best used to accelerate success

By | Venture Capital | 21 Comments

image Most venture capital dollars flow into businesses that are already showing signs of success, and that want to raise money so that they can grow faster.  I often liken best use of venture capital to using petrol to fan the flames of a fire.  Clearly that is only going to work if the fire is already burning.  VCs are sometimes criticised for riding on the coattails of success, and I think that criticism misunderstands the role that VC plays in the ecosystem, which is more to accelerate success than create it.

VCs love to talk about innovation and making true early stage investments, and indeed most VCs do make some seed deals (and some do a lot of seed deals, not least my DFJ partners in Menlo Park), but the financial logic of investing a typically sized venture fund makes it very hard to generate returns unless most of the dollars go into larger rounds which are aimed at accelerating success. 

I’m writing this in response to a guest post on Techcrunch yesterday from Vivek Wadhwa which asks What Have VCs Really Done for Innovation? In it he says that Google was already successful before ‘the deep pocketed VC’s arrived to ride Larry and Sergey’s coattails’.  This is true in the sense that Google already had a lot of traffic when the VCs invested, but ignores the fact that they didn’t yet have a revenue model and that the investment gave them time and space to grow the service past critical mass before focusing on the P&L.  The VCs didn’t create the innovation, but they did play a critical part in helping Google become the huge success it is today.

Similar stories are playing out at Facebook and Twitter right now.  A lot of the innovation at both those companies happened before they raised venture capital, but I doubt if either of them would be what they are today if they hadn’t been able to use VC to fund their losses.

None of this is to say that the venture industry couldn’t do more to stimulate innovation, it can and should.  Here in Europe a group of VCs have joined with angels and other prominent members of the ecosystem at Seedcamp which has been making very early stage investments for three years now for exactly this reason and it would be great to see more initiatives like this.  Nor is it to say that the VC industry shouldn’t improve its game in other areas. 

The first draft of this post didn’t have these last two paragraphs, but I added them because I wanted to make sure the central point of VC being best used to accelerate success didn’t get lost in a wave of anti-VC sentiment, like that which can be found in the comments to Vivek’s TC post, and to an extent in the post itself.

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Twitter Weekly Updates for 2009-09-20

By | Weekly Twitter digest | No Comments

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